Tuesday, May 18, 2010

The new healthcare law will pack 32 million newly insured people into emergency rooms already crammed beyond capacity, according to experts on healthcare facilities.

A chief aim of the new healthcare law was to take the pressure off emergency rooms by mandating that people either have insurance coverage. The idea was that if people have insurance, they will go to a doctor rather than putting off care until they faced an emergency.

People who build hospitals, however, say newly insured people will still go to emergency rooms for primary care because they don’t have a doctor.

“Everybody expected that one of the initial impacts of reform would be less pressure on emergency departments; it’s going to be exactly the opposite over the next four to eight years,” said Rich Dallam, a healthcare partner at the architectural firm NBBJ, which designs healthcare facilities.

“We don’t have the primary care infrastructure in place in America to cover the need. Our clients are looking at and preparing for more emergency department volume, not less,” he said.

Massachusetts in 2006 created near-universal coverage for residents, which was supposed to ease the traffic in hospital emergency rooms.

But a recent poll by the American College of Emergency Physicians found that nearly two-thirds of the state’s residents say emergency department wait times have either increased or remained the same.

A February 2010 report by The Council of State Governments found that wait times had not abated since the law took effect.

“That is not an unrealistic question about what’s going to happen in the next four years as you bring all these people on; who are they going to see?” McDermott said.

The Washington congressman tried to include a provision in the healthcare bill he thought would increase the number of doctors.

McDermott’s legislation would have required the government to pay for students’ medical education in return for students serving four years as a primary care physician. The measure did not make it on the final bill that eventually became law.

McDermott stressed that creating a “whole new cadre of doctors” needs to begin now to meet the rising need from patients in the future.

While the measure wouldn’t prevent the infrastructure crunch, it would have provided new doctors for people seeking care.

Richard Foster, Chief Actuary at the Centers for Medicare and Medicaid Services, told The Hill that the current dearth of primary care physicians could lead to greater stress on hospital emergency rooms.

“The supply of doctors can’t be increased very quickly – there’s a time lag,” he said, adding, “Is the last resort to newly covered people the emergency room? I would say that is a possibility, but I wouldn’t say anybody has a very good handle on exactly how much of an infrastructure problem there will be or exactly how it might work out.”

The Academy of Architecture for Health predicts hospitals will need at least $2 trillion over the next 20 years to meet the coming demand.

“As more people have access, you have to deal with the increased capacity,” said Andrew Goldberg, senior director of federal relations at the American Institute of Architects. “At the moment there is not a lot of building going on because of the economy and a lot of health care facilities can’t get the financing. We’ve been working on the Hill to try to address that issue.”

The group has called on Congress to beef-up bonding authorities and expand energy efficient tax breaks for professional buildings. The vehicle targeted is the green energy legislation making its way through the House Ways and Means Committee and Senate Finance.

Dan Noble, a principal at the Dallas-based architecture firm HKS Inc., which also specializes in designing health care facilities, believes the only remedy to meet the coming demand on hospitals is to start projects immediately.

“We would have to get very busy soon,” he said. “It would take a fairly aggressive building campaign for the next decade.”

Texas doctors are opting out of Medicare at alarming rates, frustrated by reimbursement cuts they say make participation in government-funded care of seniors unaffordable.

Two years after a survey found nearly half of Texas doctors weren't taking some new Medicare patients, new data shows 100 to 200 a year are now ending all involvement with the program. Before 2007, the number of doctors opting out averaged less than a handful a year.

“This new data shows the Medicare system is beginning to implode,” said Dr. Susan Bailey, president of the Texas Medical Association. “If Congress doesn't fix Medicare soon, there'll be more and more doctors dropping out and Congress' promise to provide medical care to seniors will be broken.”

More than 300 doctors have dropped the program in the last two years, including 50 in the first three months of 2010, according to data compiled by the Houston Chronicle. Texas Medical Association officials, who conducted the 2008 survey, said the numbers far exceeded their assumptions.

The largest number of doctors opting out comes from primary care, a field already short of practitioners nationally and especially in Texas. Psychiatrists also make up a large share of the pie, causing one Texas leader to say, “God forbid that a senior has dementia.”

The opt-outs follow years of declining Medicare reimbursement that culminated in a looming 21 percent cut in 2010. Congress has voted three times to postpone the cut, which was originally to take effect Jan. 1. It is now set to take effect June 1.

Not cost-effectiveThe uncertainty proved too much for Dr. Guy Culpepper, a Dallas-area family practice doctor who says he wrestled with his decision for years before opting out in March. It was, he said, the only way “he could stop getting bullied and take control of his practice.”

“You do Medicare for God and country because you lose money on it,” said Culpepper, a graduate of the University of Texas Medical School at Houston. “The only way to provide cost-effective care is outside the Medicare system, a system without constant paperwork and headaches and inadequate reimbursement.”

Ending Medicare participation is just one consequence of the system's funding problems. In a new Texas Medical Association survey, opting out was one of the least common options doctors have taken or are planning as a result of declining Medicare funding — behind increasing fees, reducing staff wages and benefits, reducing charity care and not accepting new Medicare patients.

In 2008, 42 percent of Texas doctors participating in the survey said they were no longer accepting all new Medicare patients. Among primary-care doctors, the percentage was 62 percent.

The impact on doctors has not been lost on their patients. Kathy Sweeney, a Houston retiree, twice has been turned away by specialists because they weren't accepting new Medicare patients. She worries her doctors might have to drop her if Medicare cuts go through and they can't afford to continue in the program.

“I've talked to them about the possibility,” said Sweeney, who sent her legislators a letter calling on them to fix Medicare. “They're hanging in there as long as there's not a severe cut, but just thinking I couldn't continue doctor-patient relationships I built up over years is disturbing. Seniors should be able to see the doctors they want.”

The problem dates back to 1997, when Congress passed a balanced budget law that included a Medicare payment formula aimed at reining in spending. The formula, which assumed low growth rates, called for payment cuts if spending exceeded goals, a scenario that occurred year after year as health care costs grew. The scheduled cuts, expected to be modest, turned out to be large.

Congress would overturn the cuts, but their short-term fixes didn't keep up with inflation. The Texas Medical Association says the cumulative effect since 2001 already amounts to an inflation-adjusted cut of 20.9 percent. In 2001, doctors receiving a $1,000 Medicare payment made roughly $410, after taking out operating expenses. In 2010, they'll net $290. If the scheduled 21.2 percent cut goes through, they'd net $72, effectively an 83 percent cut since 2001.

The issue caused the Texas Medical Association to break ranks with the American Medical Association and oppose health care reform efforts throughout 2009. Then TMA President Dr. William Fleming said “reform is doomed to failure” without Medicare reform and called Congress' failure to devise a rational payment plan “an insult to seniors, people with disabilities and military families.”

No surprise to senatorU.S. Sen. John Cornyn, R-Texas, said he isn't surprised by the new opt-out numbers, allowing that Congress' inability to reform Medicare is leaving “seniors without access and breaking the promise we made to them.”

“The problem has been how to eliminate the cuts without running up the deficit,” said Cornyn, responding to blame U.S. Rep. Gene Green, D-Houston, placed on the Senate for not passing a House bill that would have provided a longer-term Medicare fix. “There hasn't been the political will, but we really have no choice but to fix it.”

The growth in Texas Medicare opt-outs began in earnest in 2007, when 70 doctors notified Trailblazer Health Enterprises, the state's Medicare carrier, they would no longer participate, up from seven in 2006. The numbers jumped to 151 in 2008, fell back to 135 in 2009 and are on pace for 200 in 2010. From 1998 to 2002, by contrast, no more than three a year opted out.

Now, according to a Texas Medical Association new poll, more than four in 10 doctors are considering the move.

“I've been in practice 24 years, and a lot of my patients got old right along with me,” Culpepper said. “It's stressful to tell them you're leaving Medicare and they're responsible for payments if they want to stay with you. You feel like you're abandoning them.”

President Hugo Chavez announced Saturday the expropriation of a group of iron, aluminum and transportation companies in Venezuela's mining region.

Among the expropriated companies is Materiales Siderurgicos, or Matesi, which is the Venezuelan subsidiary of Luxembourg-based steel maker Tenaris SA.

Venezuela's socialist president said in a televised that his government was going to take over Matesi because "we couldn't reach an amicable and reasonable settlement with the owners."

Chavez said production at the company has been paralyzed since midway through last year, when Venezuela's president announced plans to nationalize it.

Chavez said he was also going to expropriate Venezuelan-owned Orinoco Iron and aluminum-maker Norpro de Venezuela C.A., which is an affiliate of the U.S. company Norpro in association with France's Saint Gobain, among other companies.

As well, Venezuela will take over transport companies that ship raw materials in areas southeast of Caracas. He did not name the companies.

Since coming to power more than a decade ago, Chavez has nationalized major companies in the electricity, oil, steel and coffee sectors, as well as other private businesses.

Reality Check: Our nation's debt is currently over $12.9 TRILLION ($117,682 per taxpayer). We are in so deep that even if we seized 100% of the fortune's of Bill Gates $53B & Warren Buffett $47B, we would only be able to pay LESS THAN ONE PERCENT (.77%) of our total debt!Our nation's debt is currently SO HIGH, (over $12.9 TRILLION, $117,682 per taxpayer) That even if we seized the ENTIRE FORTUNES of the ONE HUNDRED RICHEST PEOPLE IN THE WORLD ($1.4 trillion) we would still only be able to pay 10.8% of our total debt!

Even the entire vast fortune's of the ONE THOUSAND RICHEST PEOPLE IN THE WORLD, would come NO WHERE NEAR paying off our debt.

But you know who is expected to pay off the debt...YOU AND I, OUR CHILDREN, OUR GRANDCHILDREN!!!...

So many letter writers have based their arguments on how this land is made up of immigrants. Ernie Lujan for one, suggests we should tear down the Statue of Liberty because the people now in question aren't being treated the same as those who passed through Ellis Island and other ports of entry.

Maybe we should turn to our history books and point out to people like Mr. Lujan why today's American is not willing to accept this new kind of immigrant any longer. Back in 1900 when there was a rush from all areas of Europe to come to the United States, people had to get off a ship and stand in a long line in New York and be documented. Some would even get down on their hands and knees and kiss the ground. They made a pledge to uphold the laws and support their new country in good and bad times. They made learning English a primary rule in their new American households and some even changed their names to blend in with their new home.

They had waved good bye to their birth place to give their children a new life and did everything in their power to help their children assimilate into one culture. Nothing was handed to them. No free lunches, no welfare, no labor laws to protect them. All they had were the skills and craftsmanship they had brought with them to trade for a future of prosperity.

Most of their children came of age when World War II broke out. My father fought along side men whose parents had come straight over from Germany , Italy , France and Japan . None of these 1st generation Americans ever gave any thought about what country their parents had come from. They were Americans fighting Hitler, Mussolini and the Emperor of Japan . They were defending the United States of America as one people.

When we liberated France , no one in those villages were looking for the French-American or the German American or the Irish American. The people of France saw only Americans. And we carried one flag that represented one country. Not one of those immigrant sons would have thought about picking up another country's flag and waving it to represent who they were. It would have been a disgrace to their parents who had sacrificed so much to be here. These immigrants truly knew what it meant to be an American. They stirred the melting pot into one red, white and blue bowl.

And here we are with a new kind of immigrant who wants the same rights and privileges. Only they want to achieve it by playing with a different set of rules, one that includes the entitlement card and a guarantee of being faithful to their mother country. I'm sorry, that's not what being an American is all about. I believe that the immigrants who landed on Ellis Island in the early 1900's deserve better than that for all the toil, hard work and sacrifice in raising future generations to create a land that has become a beacon for those legally searching for a better life. I think they would be appalled that they are being used as an example by those waving foreign country flags.

And for that suggestion about taking down the Statue of Liberty , it happens to mean a lot to the citizens who are voting on the immigration bill. I wouldn't start talking about dismantling the United States just yet.

(Updates with General Casey’s comment in 10th and 11th paragraphs, McCaskill comment in third paragraph from end.)

By Tony Capaccio

May 6 (Bloomberg) -- KBR Inc. was selected for a no-bid contract worth as much as $568 million through 2011 for military support services in Iraq, the Army said.

The Army announced its decision yesterday only hours after the Justice Department said it will pursue a lawsuit accusing the Houston-based company of taking kickbacks from two subcontractors on Iraq-related work. The Army also awarded the work to KBR over objections from members of Congress, who have pushed the Pentagon to seek bids for further logistics contracts.

The Justice Department said the government will join a suit filed by whistleblowers alleging that two freight-forwarding firms gave KBR transportation department employees kickbacks in the form of meals, drinks, sports tickets and golf outings.

“Defense contractors cannot take advantage of the ongoing war effort by accepting unlawful kickbacks,” Assistant Attorney General Tony West said in a statement.

KBR, the Army’s largest contractor in Iraq, will review the litigation when it is received and “will continue to cooperate with the government,” company spokeswoman Heather Browne said in an e-mail. “Gifts of dinners, baseball tickets and similar items would violate KBR policies and KBR was not aware of these violations.”

KBR will continue to provide services in Iraq such as housing, meals, laundry, showers, water purification and bathroom cleaning under the new order, which was placed under a military contract KBR won in late 2001, shortly after the U.S. invaded Afghanistan.

‘Appropriate Safeguards’

The Army has “reviewed the government’s notice to intervene” in the whistleblower lawsuit, Army spokesman Dan Carlson said. “We feel we have appropriate safeguards in place” to protect the government’s interests.

The no-bid work order is unusual because the Army, at the insistence of Congress, has since April 2008 put all logistics orders to bid, pitting KBR against Falls Church, Virginia-based DynCorp International Inc. and Irving, Texas-based Fluor Corp.

The Army didn’t put this work out for bids because U.S. commanders in Iraq advised against it, saying that enlisting a new company would be too disruptive as the U.S withdraws, Army program director Lee Thompson said in an interview before the Justice Department action was announced.

Odierno’s View

The view of General Ray Odierno, the U.S. military commander in Iraq, was crucial to the decision, Army Chief of Staff General George Casey told reporters today.

“Odierno said, ‘I’ve got three million pieces of equipment I’ve got to get out of Iraq, I’ve got 100 or so bases to close, I’ve got to move 80,000-plus people out of here and you want me to change horses in the middle of the stream?’” Casey recounted.

The U.S. force in Iraq is scheduled to shrink from 94,000 troops today to 50,000 by August, with a complete withdrawal by December 2011.

The Army, in its statement yesterday, said putting to bid an order for 18 months’ work and making the transition to a new contractor would cost at least $77 million. The KBR work order will be awarded by Aug. 31, said Mike Hutchison, deputy director of Army logistics contracting.

Earlier U.S. Lawsuit

The lawsuit is the second government action this year against KBR. The U.S. sued the company on April 1, alleging that it used private armed security guards in Iraq between 2003 and 2006 in violation of its Army contract and then improperly billed for their services.

Before yesterday’s Justice Department announcement, the Army had said in an e-mailed statement that it was aware of the April lawsuit and would use “additional oversight measures to ensure only reasonable, allowable costs are paid” under the new work order.

The new lawsuit, filed in a Texas federal court, was based on information from two whistleblowers who work in the air cargo industry, the Justice Department statement said. The whistleblowers can get a portion of any money the Justice Department obtains in the case.

Senate Objections

KBR’s no-bid work order drew criticism from two U.S. senators even before it was announced.

Senator Claire McCaskill, the Missouri Democrat who heads a subcommittee that oversees military contracting, and the panel’s ranking Republican, Susan Collins of Maine, wrote Defense Secretary Robert Gates on April 30 urging the Army against “continued reliance” on KBR in light of the Justice Department’s April lawsuit.

“The Army has a big burden to demonstrate that a decision to not compete is in the best interest of the military and American taxpayers,” McCaskill said in a statement last night. “We will hold their feet to the fire and continue to demand accountability on this decision.”

Under the new competitive-bid approach, KBR on March 2 won a one-year, $571 million contract with four option years that, if exercised, could be worth as much as $2.77 billion.

That contract calls for KBR to provide services including transportation and postal operations. DynCorp initially protested the award and then dropped its objections.

--Editors: Bill Schmick, Ann Hughey.

To contact the reporter on this story: Tony Capaccio at acapaccio@bloomberg.net

To contact the editor responsible for this story: Jim Kirk at jkirk12@bloomberg.net

Announcing a 6.7 billion dollar loss in the first quarter, Freddie Mac said it would need the new funding by June 30 this year.

The Washington-area company has already received more than 50 billion dollars in taxpayers cash to cover losses from toxic assets.

It warned that further demands would be on the way: "Freddie Mac expects to request additional draws," the firm said in a statement.

"The size and timing of such draws will be determined by a variety of factors that could adversely affect the company's net worth."

In 2008, the government pledged to ensure that Freddie Mac, and its larger sister organization Fannie Mae, kept a "positive net worth."

The deal was designed to prop up the vital US housing market from collapsing totally and pushing the economy over the precipice.

But in a sign that the US housing sector is still in difficulty, Freddie said the percentage of its loans not paid on time or in full rose to 4.13 percent in the first three months of the year.

In the final three months of last year the rate stood at 3.98 percent.

The future of Fannie and Freddie has become the latest bone of contention between Democrats who argue they must remain government-backed to aid low-income housing and Republicans who advocate their privatization.

In March, Treasury Secretary Timothy Geithner swatted aside pressure for a swift reform of the mortgage giants as data pointed to a still struggling real estate market.

Geithner told Congress any restructuring of Fannie Mae and Freddie Mac, which received a 100-billion-dollar-plus government bailout at the height of the housing crisis, "must be done as part of a reform of the wider housing finance system."

Geithner argued reforms would "take several months" to develop and should only be "enacted and executed at a time of greater market stability."

Originally published 12:00 a.m., May 5, 2010, updated 03:27 a.m., May 5, 2010

NUGENT: Is the kettle black enough?

Ted Nugent

If ever there was a case of the proverbial pot calling the kettle black, it is the cluster of new financial "reform" regulations Washington politicians are trying to foist on the back of Wall Street.

In a typical political smoke-and-mirrors misdirection, President Obama wants us to believe greedy Wall Street bankers are to blame for our economy sinking in financial quicksand and that more government regulations and controls are the answer. Don't believe it.

The truth is that the federal government, as always, has overtly wasted, lost and blown far more of our hard-earned tax dollars than Wall Street crooks could have ripped off in their wildest Bernie Madoff imaginations. Our politicians are the real bandits and culprits of our economic calamity.

What our elected idiots willfully and with malicious forethought did not do - even when warned to do so by Fed Chairman Alan Greenspan in 2005 - was rein in the out-of-control, government-managed Fannie Mae and Freddie Mac.

Regarding Fannie and Freddie, Mr. Greenspan told Congress in 2005, "We are placing the total financial system of the future at substantial risk."

A significant Fannie and Freddie reform bill was passed by the Senate Banking Committee in 2005, but the Democrats prevented the bill from becoming law and thus set in motion the events that would steer our economy straight off the cliff. While this economic storm was brewing, then-Sen. Barack Obama collected more than $125,000 from Fannie and Freddie in political contributions.

The Democrats' pathetic, unethical and arguably criminal lack of control of Fannie and Freddie, coupled with their own pressure on banks to make high-risk home loans to people who couldn't afford them, is the reason for our economic meltdown. Believe it and blame the Democrats - and the Republicans who failed to do a thing.

Now those very same Democrats want to control Wall Street. Unbelievable. Welcome to the Planet of the Apes.

America is going bankrupt not because of crooked and unethical Wall Street investment bankers. We are in this financial morass because of a bloated, ineffective, unaccountable and wasteful Fedzilla.

Poll after poll finds Americans have little faith in our professional political windbags, who, in addition to causing our current economic meltdown, have robbed and plundered the Social Security Trust Fund and Medicare over the years to the point that both these entities are not only broke, but massively in debt. President Obama's solution: more government borrowing, taxing and spending. Anti-social insecurity anyone?

No one in Washington ever accepts any blame or fault. There is always someone or something else to blame. This time, it's Wall Street's fault, but anyone with an ounce of common sense and a modicum of desire to know the truth understands that the underlying fault for all - yes, all - of our economic, social and cultural problems is Fedzilla and the political punks who feed it for their own political profit. To hell with America; they need votes.

How dare these political frauds shake their own corrupt finger at Wall Street. Where are the journalists who should be shouting daily questions at these political frauds and pouring buckets of hot ink on the editorial pages of newspapers and blogs across the country, exposing these elected frauds who are financially raping and plundering America? Our forefathers would encourage us to get a bucket of hot tar and some feathers and run these crooks out of town.

If we continue down this economically suicidal, massive-deficit-spending and higher-tax path that President Obama is intent on, our economy will continue to grind to a halt, unemployment will remain high, investments will dry up, and entrepreneurs will fade away. I'm just a guitar player, and I figured that out decades ago.

The Tea Party gets it. Its members understand that out-of-control and unsustainable government spending has put America on the path to financial ruin. And what does our lapdog media do? Castigate the Tea Party as being a bunch of illiterate racists. What a joke. I heard the circus is looking for some new clowns.

I'll bet the president a backyard beer at the White House that many more Americans would entrust their future to Wall Street bankers than to the elected frauds and idiots who have plundered the national treasury and put America's future on thin ice.

Monday, May 03, 2010

I'm Arizona State Senator Sylvia Allen. I want to explain SB 1070 which I voted for and was just signed by Governor Jan Brewer.

Rancher Rob Krantz was murdered by the drug cartel on his ranch a month ago. I participated in a senate hearing two weeks ago on the border violence, here is just some of the highlights from those who testified.

The people who live within 60 to 80 miles of the Arizona/Mexico Border have for years been terrorized and have pleaded for help to stop the daily invasion of humans who cross their property . One Rancher testified that 300 to 1200 people a DAY come across his ranch vandalizing his property, stealing his vehicles and property, cutting down his fences, and leaving trash. In the last two years he has found 17 dead bodies and two Koran bibles.

Another rancher testified that daily drugs are brought across his ranch in a military operation. A point man with a machine gun goes in front, 1/2 mile behind are the guards fully armed, 1/2 mile behind them are the drugs, behind the drugs 1/2 mile are more guards. These people are violent and they will kill anyone who gets in the way. This was not the only rancher we heard that day that talked about the drug trains.

One man told of two illegal's who came upon his property one shot in the back and the other in the arm by the drug runners who had forced them to carry the drugs and then shot them. Daily they listen to gun fire during the night it is not safe to leave his family alone on the ranch and they can't leave the ranch for fear of nothing being left when they come back.

The border patrol is not on the border. They have set up 60 miles away with check points that do nothing to stop the invasion. They are not allowed to use force in stopping anyone who is entering. They run around chasing them, if they get their hands on them then they can take them back across the border.

Federal prisons have over 35% illegal's and 20% of Arizona prisons are filled with illegal's. In the last few years 80% of our law enforcement that have been killed or wounded have been by an illegal.

The majority of people coming now are people we need to be worried about. The ranchers told us that they have seen a change in the people coming they are not just those who are looking for work and a better life.

The Federal Government has refused for years to do anything to help the border states. We have been over run and once they are here we have the burden of funding state services that they use. Education cost have been over a billion dollars. The healthcare cost billions of dollars. Our State is broke, $3.5 billion deficit and we have many serious decisions to make. One is that we do not have the money to care for any who are not here legally. It has to stop.The border can be secured. We have the technology we have the ability to stop this invasion. We must know who is coming and they must come in an organized manner legally so that we can assimilate them into our population and protect the sovereignty of our country. We are a nation of laws. We have a responsibility to protect our citizens and to protect the integrity of our country and the government which we live under.

I would give amnesty today to many, but here is the problem, we dare not do this until the Border is secure. It will do no good to forgive them because thousands will come behind them and we will be over run to the point that there will no longer be the United States of America but a North American Union of open borders. I ask you what form of government will we live under? How long will it be before we will be just like Mexico, Canada or any of the other Central American or South American countries? We have already lost our language, everything must be printed in Spanish also. We have already lost our history it is no longer taught in our schools. And we have lost our borders.

The leftist media has distorted what SB 1070 will do. It is not going to set up a Nazi Germany. Are you kidding. The ACLU and the leftist courts will do everything to protect those who are here illegally, but it was an effort to try and stop illegal's from setting up businesses, and employment, and receiving state services and give the ability to local law enforcement when there is probable cause like a traffic stop to determine if they are here legally. Federal law is very clear if you are here on a visa you must have your papers on you at all times. That is the law. In Arizona all you need to show you are a legal citizen is a driver license, MVD identification card, Native American Card, or a Military ID. This is what you need to vote, get a hunting license, etc.. So nothing new has been added to this law. No one is going to be stopped walking down the street etc... The Socialist who are in power in DC are angry because we dare try and do something and that something the Socialist wants us to do is just let them come. They want the "Transformation" to continue.

Maybe it is too late to save America. Maybe we are not worthy of freedom anymore. But as an elected official I must try to do what I can to protect our Constitutional Republic. Living in America is not a right just because you can walk across the border. Being an American is a responsibility and it comes by respecting and upholding the Constitution the law of our land which says what you must do to be a citizen of this country. Freedom is not free.

(Also, she doesn't mention that we hear regularly that Phoenix is the kidnap capitol of the country, and those who are being kidnapped are illegals who are being kidnapped by the coyotes. For those of you who are not familiar with the term coyotes, They are the ones who smuggle the illegals into the area and hide them in "drop houses".)

Saturday, May 01, 2010

"In short, GM is using government money to pay back government money to get more government money. And at a 2% lower interest rate at that. This is a nifty scheme to refinance GM's government debt--not pay it back!"

The General Accountability Office concluded, ""The Treasury is unlikely to recover the entirety of its investment in Chrysler or GM."

GM CEO Ed Whitacre announced in a Wall Street Journal column Wednesday that his company has paid back its government bailout loan "in full, with interest, years ahead of schedule." He is even running TV ads on all major networks to that effect--a needless expense given that a credulous media is only too happy to parrot his claims for free. Detroit Free Press' Mike Thompson, for example, advises bailout proponents to start "warming up their vocal chords" to jeer their opponents with chants of "I told you so."

But before belting out their victory aria, GM-boosters ought to hear the whole story--not just the fairytale version about Government Motors' grand comeback that Mr. Whitacre is feeding them.

Uncle Sam gave GM $49.5 billion last summer in aid to finance its bankruptcy. (If it hadn't, the company, which couldn't raise this kind of money from private lenders, would have been forced into liquidation, its assets sold for scrap.) So when Mr. Whitacre publishes a column with the headline, "The GM Bailout: Paid Back in Full," most ordinary mortals unfamiliar with bailout minutia would assume that he is alluding to the entire $49.5 billion. That, however, is far from the case.

Because a loan of such a huge amount would have been politically controversial, the Obama administration handed GM only $6.7 billion as a pure loan. (It asked for only a 7% interest rate--a very sweet deal considering that GM bonds at that time were trading below junk level.) The vast bulk of the bailout money was transferred to GM through the purchase of 60.8% equity stake in the company--arguably an even worse deal for taxpayers than the loan, given that the equity position requires them to bear the risk of the investment without any guaranteed return. (The Canadian government likewise gave GM $1.4 billion as a pure loan, and another $8.1 billion for an 11.7% equity stake. The U.S. and Canadian government together own 72.5% of the company.)

But when Mr. Whitacre says GM has paid back the bailout money in full, he means not the entire $49.5 billion--the loan and the equity. In fact, he avoids all mention of that figure in his column. He means only the $6.7 billion loan amount.

But wait! Even that's not the full story given that GM, which has not yet broken even, much less turned a profit, can't pay even this puny amount from its own earnings.

So how is it paying it?

As it turns out, the Obama administration put $13.4 billion of the aid money as "working capital" in an escrow account when the company was in bankruptcy. The company is using this escrow money--government money--to pay back the government loan.

GM claims that the fact that it is even using the escrow money to pay back the loan instead of using it all to shore itself up shows that it is on the road to recovery. That actually would be a positive development--although hardly one worth hyping in ads and columns--if it were not for a further plot twist.

Sean McAlinden, chief economist at the Ann Arbor-based Center for Automotive Research, points out that the company has applied to the Department of Energy for $10 billion in low (5%) interest loan to retool its plants to meet the government's tougher new CAFÉ (Corporate Average Fuel Economy) standards. However, giving GM more taxpayer money on top of the existing bailout would have been a political disaster for the Obama administration and a PR debacle for the company. Paying back the small bailout loan makes the new--and bigger--DOE loan much more feasible.

In short, GM is using government money to pay back government money to get more government money. And at a 2% lower interest rate at that. This is a nifty scheme to refinance GM's government debt--not pay it back!

GM boasts that, because it is doing so well, it is paying the $6.7 billion five years ahead of schedule since it was not due until 2015. So will there be an accelerated payback of the rest of the $49.6 billion investment? No. That goal has been pushed back, as it turns out.

In order to recover that investment, the government has to sell its equity. It plans to do that only when GM becomes a publicly traded company once again. GM was hoping to turn a profit by the end of 2010 and float an initial public offering this winter. However, GM Chief Financial Officer Chris Liddell, when queried about that timeline a few days ago, demurred. The offering will be made, he said, "when the markets and the company are ready."

(Take that, taxpayers!)

The reality is that there is no certainty that GM will ever be able to make taxpayers whole. Some analysts such as Center for Automotive Research's Sean McAlinden and Global Insight's George Magliano believe that it will--eventually. McAlinden maintains that this will happen when the company's market capitalization touches $60 billion. (At GM's peak in 2000, this level was only $57 billion.) This is a challenging but not an impossible goal--provided the economy does not dip into another recession, he maintains. Magliano too maintains that the company will be able to pay back taxpayers if the industry is able to ramp up annual vehicle sales from the expected 10.8 million this year to 17 million in 2014 and GM captures 20% of these sales.

The General Accountability Office, on the other hand, remains deeply pessimistic. It concluded in a December report (which a more recent April report has said nothing to contradict, despite media spin to the contrary) that: "The Treasury is unlikely to recover the entirety of its investment in Chrysler or GM, given that the companies' values would have to grow substantially more than they have in the past."

Mr. Whitacre's bailout payback ploy is a desperate attempt to win back the car-buying public deeply disgusted by the spectacle of GM rattling its tin-cup before Uncle Sam. But the fact of the matter is that the company is still deep in the hole. It might claw its way back – or it might not. But surely it's premature for its media boosters to pop open the champagne bottle without getting their story straight?

Shikha Dalmia is a senior analyst at Reason Foundation and a biweekly Forbes columnist